What is a Massage Franchise?

What is a Massage Franchise?

Recently I have begun to wonder how many individuals understand the franchise business model.  Let’s explore this topic like a massage session: General –Specific-General.

GENERAL

• A franchise is a way to do business. Franchising is a business opportunity that's somewhere between buying an existing business and developing a business from scratch.
• The franchisor is the person or persons who did all the work from scratch to develop a successful business operations model. 
• The model is the franchise when the originator then sells the model to others who want to do business the same way.
• The person(s) who buy the business model is call the franchisee.   In exchange for an initial set-up fee and a monthly payment, the franchisor provides the franchisee a business model, marketing supplies, staff-training assistance, managerial consulting and brand awareness .

A short way to restate this information is:

A franchisee buys a license from a franchisor to be a dealer of that business model (franchise). The owner of the franchise sells a product or service through its franchisees.

There are many advantages to the franchise business model. Franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal. A network of interdependent business relationships is formed that allows a number of people to share:

• ·        A brand identification
• ·        A successful method of doing business
• ·        A proven marketing and distribution system

There are downsides to franchising as well.  It costs money to buy and set up the franchise business.   There is a onetime fee paid by the franchisee to the franchisor to "buy into" the franchise. The initial fees typically range from $35,000- $45,000. That is a lot of money. Generally, the fee reimburses the franchisor for the costs of initial training and support for new franchisees. Next the location must be rented or purchased and then remodeled, equipped and supplied to fit the franchise facility design. For example: we all recognize how a McDonalds building is designed. This part of the upfront money is really a lot ranging from $100,000 to over a million dollars.  Then about a year of operating costs must be available. That is expensive too.  The point is that the franchisee has to invest A LOT of money to get the business up and running.

In addition to all the overhead costs to operate the business there are additional ongoing fees related just to being a franchise business. 

Staff are employees: This means that the business owner must pay at least minimum wage for every hour worked and all matching taxes as well as other federal and state mandated withholding.

• Social Security and Medicare Taxes  
• Federal Unemployment Taxes
• State Unemployment Taxes
• Workers Compensation Average (varies by industry)

A conservative rule of thumb is to add 30% to an employee's wages to calculate the total cost to the employer. So if someone is paid $10.00 an hour the cost to the employer is $13-$14 per hour . If self-employed YOU have to pay those taxes. That means for every $ 10 you make you are only really getting  about $7 in your pocket. 

If there are 5 employees working each shift and the business has two shifts that means that the weekly payroll is about $6,000.00. If the cost of a service is $50.00 then 120 services a week must be sold just to pay payroll.

SPECIFIC

Massage Franchises.

As an employee in a massage franchise business you have to have the whole picture to understand why things are done the way they are done and why the pay rate is the way it is. Each of the franchise models is more or less the same. Really does not matter which one.  Some have higher services fees for the massage or maybe a facial and some a bit lower.  A middle range initial investment of the franchise owner is about $350,000 plus a year of operating costs. $500,000 as a commitment is reasonable.  Before that franchise owner makes any money, the business must earn back $500,000.  Let’s also use an average of $50 as the amount paid for each unit of service—a massage or facial.  The business must sell 10,000 massage or facial sessions. –That is a lot.  Full time massage practice ranges from between 1000-1200 massage sessions a year or  20-25 session weekly (based on 50 weeks).  At the same time and for ever after, the business must generate enough gross income to pay all expenses BEFORE the franchise owners get any profits. This amount can range from $ 250,000 a year to $350,000 a year—about 6500 service units ($50 massage sessions).

It is time consuming and expensive to train new employees and turnover in the franchises is huge. Turnover occurs for many reasons but a couple biggies are ergonomics and unrealistic income expectations and those flawed foundations are often laid in the entry level education.  Also the employers do  not just have massage therapists to pay, but also receptionists and housekeeping, management, repairs and maintenance staff. In the massage franchises the product is quality massage therapy.  It is hard to find dedicated massage therapists that really understand the difference between being self employed and an employee

What should a massage therapist be paid?  

Based on educational and responsibility similarities when compared EMT(emergency medical technicians), medical assistants, cosmetologists, all of who have more training than massage therapists at the current 500-625 hour standard, $25,000 a year at entry level for a 40 hour work week(25-30 massage hours in the 40 hours)to $38,000 a year for an experienced massage therapist working a 40 hour work week.

A 40 hour work week is 2040 hours of work per year.   You would need to provide 25 -30 actual hours of massage during the 40 hours or at least 1400 hours of massage per year.  Now remember, the low end pay of $ 25,000 earned per year costs the employer an addition $7500 in taxes you would have to pay yourself if self-employed.  So actual yearly wage is really $32,500.

If the cost of each massage is $50 you have to provide a minimum of 650 massage sessions per year just to pay your wages. In addition, all the other overhead operating expenses must be paid. I typically teach 30-50 percent of gross must be allocated to pay these bills so- $12,000- $14,000 in the mid-range (I used about 40% of $32,500). You have to earn this just to have a place to work- whether self-employed or employee. And as an employee, the operating expense amount is lower because others are sharing costs.  This is another 250 massage sessions at $50 each. So when working at a franchise you have to do 900 massage sessions before the owner makes ANY money off of you IF you want to earn $25,000 a year.

REALITY CHECK--- And this is based off of $50 per massage. Most unit sales will be less than the $50 because of member discounts, coupons, specials, etc.

Also, the franchise environment is typically a place where massage therapists receive gratuities/tips which can add $7000-$10,000 to the income per year.

If massage therapists were paid a flat $15 per hour for a 40 hour work week, the yearly income is $30,600 which costs the employer $40,600 in payroll and another $12,000 in operating costs. So the franchise owner has to cover about $53,000 of expenses if they pay $15.00 an hour.  That is 1375 hours of massage per year working 40 hour work weeks and based on figures of actual massage hours of 1400 per year (even though you are getting paid for 2040 hours a year). 

Soooo-the profit to the owner on this model of employment is based on 25 units of service at $50 or $1250 a year.  If that owner has 10 massage therapists working full time, yearly profit margin is about $20.000 and that is less than what each massage therapist makes.  Quite a different picture isn’t it. These figures are within a realistic range and based on maximum schedule.  What happens when there are no shows or a bad weather day? This is a tough cookie to eat.  A lot of people have their fascia in a twist.  The franchise model is misunderstood in the massage community. This is unfortunate. 

What are the solutions? Paying employees less for sitting around when not doing a massage and charging more for the services hoping there is enough volume. The massage franchise membership model was originally based on affordable massage for the masses. The average yearly income is around $35,000 per year. The most a massage can cost to serve this majority of the population is $-40- $50 with the tip.  That means the price point cannot be much more than $45 per massage and that only buys one massage a month which in really not enough to gain the health benefits massage can provide.  Volume will likely decrease as the cost of a massage exceeds $50-$75 unless you are specifically focused on a demographic that earns more than $100,000 per year. $40 -$50 per massage is a better price point for client retention, multiple massage session and volume.   So much for raising the price of services.  

Owners  may do better than the $20,000 profit mentioned earlier. They work off of volume and often own multiple business.  There are product sales and add on services.  Paying the low rate for sitting helps the profit margin. Still being a franchise owner is not the huge money maker many would think and the intent is not to work massage therapists to the bone and treat them badly.

GENERAL

You will make the most money as self-employed massage therapist going to client’s homes or places of work. BUT THIS IS A LOT OF WORK-  You will have to charge a minimum of $75-$100 for each massage session provided.  This fee is out of range for the majority of people but there are some who can pay.   You will have to gross at least $80,000 to net $50,000 and you have to pay your taxes on the $50,000.  It takes at least 3 hours of time to provide a 60 minute massage on site. With all the driving around and set up and take down time 3- 4 sessions a day or 15 -16 sessions is the max you can do within the 40 hour work week.  You can gross $75,000-$80,000 a year—but you will only make $35,000-$40,000 a year after paying all taxes and operating expenses and with a mobile business there is no facility rental.  You still have to do all the laundry and everything else. You will make-if no one cancels and you are booked full 51 weeks out of the year (I week vacation)- maybe $18 an hour.  This is how I have structured my massage business for over 30 years so I have lived this model. AND I was really busy often seeing 6 clients a day.   I have been my own employer and employee and up until a couple years ago maintained a full time practice.  

In 2015, the average annual income for a massage therapist (including tips) was estimated to be just under $25,000 per year.  BUT most massage therapists are only working 1/2 to 3/4 time and only providing 40-50 sessions a month ( 10-12 sessions a week--1/2 of full time at 25 sessions --60 minute sessions used as base)..You can do much better than that at a well-managed franchise if the number of massage hours is similar.

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According to the AMTA the average, massage therapist worked 25.3 hours per week in 2015 and was paid for 19.7 of the 25.3 average hours.  Also indicated in the report massage therapists provided massage for an average of 45 clients a month or between 11 and 12 clients a week. Only about 50% of those surveyed by AMTA indicated that they wanted to work more hours. (AMTA-- The 2016 Massage Profession Research Report).  Also according to the AMTA 2016 Massage Profession Research Report, gross income ( I assume that means prior to income taxes and after overhead is deducted if self-employed)  was$24,132  in  2014 and $24,519 in 2015. That sounds terrible until you realize that is PART TIME and about 62% of the typical forty hour work week. 38% of the reported income of $24,519 is about $9500.  Therefore , factored out to full time,  this means that full time earning for a massage therapist (prior to income tax) is about $ 34,500 per year.

So why are massage therapists working part time?  About 50% are happy with part time. So what about the other half?  Why are massage therapist only providing 45 sessions a month—part time instead of  90 massage sessions?Two reasons come to mind.

Ergonomics/bodymechanics and lack of client volume.  I have been pleading for an independent ergonomics and biomechanical analysis for massage therapy for YEARS.   The massage therapy leadership organizations NEED to fund a “for real” independent analysis by objective experts outside the massage profession to get an unbiased perspective and usable recommendations.  I do not care who you are or how long you have been doing massage or teaching (including me), all of us are guessing.  We do not know for sure and it is time to know!

Client volume is an issue as well.  So what are the obstacles preventing more people from receiving massage?  Again, according to the AMTA 2016 Massage Profession Research Report, Females without children in the home with incomes over $50,000 are the main massage consumer and 1/3 of all massage consumers had a household income of $100,000 or more in 2015.  Only ¼   of those with a household income between $75,000 and $100,000 received a massage in 2015. Seventeen percent of those with incomes between $35,000 and $50,000 got a massage in 2015, down from 22 percent in 2014. And only 7%  of those with an income of less than $35,000 got a massage in 2015, down from 8 percent in 2014.

There is a huge potential to increase clients since only a small percentage of people actually receive massage.  The largest group of people are those making less than $50,000 a year.  Price point of a typical 60 minute massage session will need to be between $40 and $50 for these individuals

How often clients receive a massage is also an issue.  Many who get massage only schedule once a month. Research has shown multiple times that that frequency is not enough to generate and sustain benefit.   Weekly massage sessions are idea but realistic scheduling for clients is a massage every other week.  Increasing the frequency of massage for current clients would double the session hours worked. What are the obstacles for receiving more massage sessions in a month?  Cost and time with cost being the biggest deterrent.  If the average fee for massage is $ 65  the monthly cost for a client receiving a massage every other week is  $1625 a year or $135 per month.   For those with incomes less than $40,000 a year that is a real chunk of money.  For those with yearly incomes of $ 75,000 or more that is 2% of income but for those making $35,000 a year it is 5% of income.  Those earning $35,000 -$40,000   only have $700 a year (2% of income)  of disposable income to potentially spend on massage.  The most they could spend is $30 a massage session if they received  1 massage session a month.

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Here is who is getting a massage----

From AMTA :
Average massage consumer is female, has a household income over $50,000 and does not have children under 18 in the household.Household Income – Thirty-one percent of all massage consumers had a household income of $100,000 or more in 2015, and 38 percent of consumers in households with an income of $100,000 or more had a massage in 2015.
 Twenty-four percent of Americans that have a household income between $75,000 and $100,000 received a massage in 2015, up from 16 percent in 2014.
 Twenty-one percent of Americans that have a household income between $50,000 and $75,000 received a massage in 2015, up from 17 percent in 2014.
 Seventeen percent of Americans that have a household income between $35,000 and $50,000 got a massage in 2015, down from 22 percent in 2014.
 Seven percent of Americans that have a household income of less than $35,000 got a massage in 2015, down from 8 percent in 2014.
The 2016 Massage Profession Research Report

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 Most massage franchises are well managed, but not all. If you are working in the franchise system and the managers and owners are not doing a good job keeping up their side of the business----and if you are a good employee-- meaning appropriate business behavior, good retention rate for clients, tending to cleaning and facility management duties and want to be part of the solution---then diligently identify the problems as you see them, write them down with potential solutions and respectfully present to the franchise manager.  If that does not work go to the owners and if there is still no improvement go  to the Franchise corporate offices.  IF STILL NO SUCCESS THEN QUIT. THERE IS A SHORTAGE OF MASSAGE THERAPISTS RIGHT NOW.  YOU CAN FIND ANOTHER POSITION. 

If you are motivated to complain, gossip and generally contribute the problem then quit, go into business for yourself .  If you do not like all the standardization, rules and pay  then go to work for yourself.  If you are a quality massage therapist dedicated to service you will have a full schedule and won’t be sitting around making  a minimum wage base an hour.  If you are sitting around and not getting retention and client rebooking then take a good look at your professional behavior and skill set.

Employers: If your are good employers you realize that you are in a team relationship with your employees. Do not be aloof and distant. Be part of the team by sharing and communicating and you are not too good to clean the bathroom either ! Support your excellent employees and get rid of the employees that are a strain and drain. One bad apple spoils the whole barrel. 

Finally:  Educators stop instilling unrealistic income expectations. Present the employee model of career development with the same objectivity as you present self employed.  Do not downgrade either career path- present the facts-the real facts.

Disclosure: My family owns a franchise massage clinic.  We are excellent employers and ours employees are part of the success team.